SCC - Careless Garage Not Liable For Injury to Teenager

Rankin (Rankin’s Garage & Sales) v. J.J. 2018 SCC 19 (Rankin)

The Supreme Court of Canada recently held (7-2) that the owners of a commercial garage did not owe a duty of care to a boy who was seriously injured after he and a friend stole a car from the garage even though the garage was negligent in allowing the car to be stolen.

In the summer of 2006, in the village of Paisley, Ontario, the plaintiff J (who was then 15 years old) and his friend C (then 16 years old) were at C’s mother’s house.  The boys drank alcohol, some of which was provided by C’s mother, and smoked marijuana.

After midnight, the boys left the house intending to steal valuables from unlocked cars.  Eventually, they made their way to Rankin’s Garage & Sales, a business located near Paisley’s main intersection.  The garage property was not secured and the boys began checking for unlocked cars.  C found an unlocked Toyota Camry parked behind the garage.  The keys were in the car’s ashtray.  Although he did not have a driver’s license and had never driven on the road before, C decided to steal the car so he could go and pick up a friend in nearby Walkerton, Ontario.  C told J to get in, which he did. C drove the car out of the garage and headed towards Walkerton.  On the highway, the car crashed and J suffered a catastrophic brain injury.

Through his litigation guardian, J sued Rankin’s Garage, his friend, C and C’s mother for negligence.  The issue on appeal to the Supreme Court was whether Rankin’s Garage owed J a duty of care. 

Justice Karakatsanis wrote a majority decision for seven justices of the court.  Justice Brown wrote a dissenting decision (with Justice Gascon concurring). 

The majority held that the case could be resolved based on a straightforward application of existing tort law principles.  It held that J did not provide sufficient evidence to support that Rankin’s Garage owed him a duty of care.

Because there is no clear guidance in Canadian case law on whether a business like the garage owes a duty of care to someone who was injured following the theft of a vehicle, the Supreme Court conducted an Anns/Cooper analysis.  That analysis provides that to establish a duty of care, there must be a relationship of proximity in which the failure to take reasonable care might foreseeably cause loss or harm to the plaintiff.  Once foreseeability and proximity are established, a prima facie duty of care is made out.  The question is an objective one, and properly focused, is whether foreseeability was present prior to the accident and not with the aid of 20/20 hindsight.

The court held that although the results of this case were tragic, physical injury to J was only foreseeable when there is something in the facts to suggest that there is not only a risk of theft of the car, but also a risk that the stolen car might be operated in a dangerous manner.  The risk of theft in general does not automatically include the risk of theft by minors.  The court found that in this case there was insufficient evidence to suggest that minors would frequent the premises at night or be involved in joyriding or theft.  Rankin’s Garage, as a commercial garage, did not have a positive duty to guard against the risk of theft by minors.  The fact that J was a minor does not automatically create an obligation for the company to act. 

The court held that J had not met the burden of establishing a prima facie duty of care because reasonable foreseeability could not be established on the factual record of the case.  A business will only owe a duty to someone who is injured following the theft of a vehicle when in addition to theft the unsafe operation of the stolen vehicle was reasonably foreseeable. 

The dissenting judges held a view that many may believe was more logical.  They held that the concept of “reasonable foreseeability” represents a low threshold and is usually quite easy to overcome.   A plaintiff must merely provide evidence to persuade the court that the risk of the type of damage that occurred was reasonably foreseeable to the class of the plaintiff that was damaged.  In this case, both the trial judge and the Ontario Court of Appeal held that it was reasonably foreseeable that an individual such as J could suffer physical injury as a consequence of Rankin’s Garage’s negligence in failing to properly lock, secure and store vehicles.  Justices Brown and Gascon concluded that the majority of the court had conceded that the risk of theft was reasonably foreseeable but, in order to hold the garage owner responsible, would have required additional evidence that theft would have occurred at the hands of a minor in order to find that physical injury to J was foreseeable.  The dissenting judges held that minors are no less likely to steal cars than any other individual.  In order to establish a duty of care, J was not required to show that the characteristics of the particular thief or the way in which the injury occurred were foreseeable.  Imposition of a duty of care was conditioned only upon J showing that physical injury to him was reasonably foreseeable under any circumstances flowing from Rankin’s Garage’s negligence.    

Regards,

Blair

Ontario Appeal Court Dismisses Class Action Against Manulife For Pure Economic Loss

The Ontario Court of Appeal has affirmed a trial judge's decision to dismiss a class action against the Manufacturers Life Insurance Company (“Manulife”) on the basis that there was no cause of action for the plaintiffs' pure economic loss.

 

In Mandeville v. The Manufacturers Life Insurance Company, 2014 ONCA 417, the appeal court considered whether Manulife owed a novel duty of care to certain policyholders in connection with its decision to "demutualize" the company.  
 

As a mutual insurance company, Manulife was governed by the Insurance Company’s Act (the “Act”).  The Act required Manulife to obtain regulatory approval for the transfer (i.e., the demutualization) from the Canadian government.  Because the “block of business” in issue was located in Barbados, Manulife also needed the approval of the Barbados government.

 

Approximately 8,000 residents of Barbados had participating policies with Manulife that were transferred to the Barbados Insurance Company.  In demutualizing, Manulife converted from a mutual insurance company to a stock company.  Because the class members policies had been transferred to the Barbados Insurance Company, they were no longer Manulife participating policyholders and therefore were ineligible to share in the value of the company.

 

The class action brought by the Barbados policyholders claimed that Manulife was negligent and breached its fiduciary duty that it owed to them.  Their negligence claim was founded on the allegation that Manulife knew it was going to demutualize when it transferred its Barbados business and that it ought to have structured the transfer in a way that protected or preserved the class numbers’ rights to share in the value of Manulife on demutualization.  They sought damages equal to the amount that the class members would have received had they been treated as eligible policyholders on demutualization.

 

After a 29 day common issues trial, Justice Newbould of the Ontario Superior Court concluded that while Manulife owed the Barbados policyholders a prima facie duty of care based on foreseeability of harm and proximity, for policy reasons, he refused to recognize that duty of care.  Had he found Manulife liable, Justice Newbould would have ordered Manulife to pay damages of approximately $82 million, plus interest.

 

The class members advanced an alternative theory that claimed that Manulife should have compensated them for the loss of their “ownership rights” at the time of the transfer.  Justice Newbould also rejected this theory, but determined that if liability had been established on that basis, he would have ordered Manulife to pay damages of $24.5 million, plus interest.

 

The class members appealed to the Court of Appeal.  Manulife cross-appealed on the issue of damages.  Justice Gillese writing for the Court of Appeal (Justices Blair and Strathy) held that the appeal and the cross-appeal should be dismissed.

 

In coming to the appeal court’s decision, Justice Gillese reviewed the key concepts in play about how a mutual insurance company was established and how it demutualized.  She then set out a brief history of demutualization in Canada beginning in the late 1950’s when insurance companies in Canada became concerned about their vulnerability to hostile takeovers, the enactment by Parliament of amendments to the Canadian and British Insurance Companies Act (predecessor to the Act) to allow stock companies to mutualize and ending in the 1990’s when insurance companies began to see the advantages of converting back into stock companies. 

 

In 1990, Manulife decided to sell its life insurance in the Caribbean – Atlantic region because the business was too small to operate effectively and its growth prospects were poor.  Manulife eventually sold all of its business in the Caribbean, except for the business in Barbados.  In Barbados, an insurance company required approval of the Supervisor of Insurance in order to transfer all or part of its business to another company.  Justice Gillese explained in detail Manulife’s attempts to transfer its Barbados business.  It was finally able to reach an agreement to do so in 1996.  Manulife obtained regulatory approval to close the sale and transfer its Barbados policies from both the Canadian and Barbados regulators.  Manulife’s demutualization became effective approximately 3 years later, in September of 1999.

 

In 2002, the proceeding was certified as a class action by Justice Nordheimer.  Justice Nordheimer concluded that the regulatory approval given by Barbados Government did not automatically bar the Barbados policyholders from bringing the action.

 

Ten years after certification, the matter was brought to a common issues trial.

 

After reviewing the findings made by the trial judge, the Court of Appeal held that the appeal raised a single issue:  Did the trial judge err in refusing to recognize that Manulife owed the class members a duty of care at the time of the transfer?

 

The Court held that the nature of the appellants’ claim was not straightforward in this case.  Justice Gillese wrote that the question wasn’t whether the participating policyholders could be described as owners of a mutual insurance company.  It was whether at the time of the transfer to the Barbados Insurance Company, whether the class members had a legally recognized right or interest in respect of a possible demutualization by Manulife.  She held that they did not.  At the time of the transfer in 1996, mutual companies like Manulife were not permitted to demutualize.  That right only came into existence in 1999.  The terms of the class members’ policies did not refer to any right to receive benefits on demutualization.  In addition, there was no such right afforded by statute or regulation.  Because Manulife had no right to demutualize in 1996, the appellants could have had no right to share in the benefits of demutualization.

 

Justice Gillese concluded that a hope or mere expectancy is not illegally enforceable right or interest.

 

In addition, the Court of Appeal held that the appellants’ claim was one for pure economic loss.  Pure economic loss is loss suffered by an individual that is not accompanied by physical injury or property damage.  Damages claimed by the appellants is equivalent to the benefits the class members would have received had they been treated as eligible policyholders upon Manulife’s demutualization.  The damages are not causally connected to physical injury to their persons or physical damage to their property.

 

When a claim is made for pure economic loss, the Supreme Court of Canada in Martel Building Ltd. v. Canada, 2000 has held that such claims or require greater scrutiny when the court is deciding whether to recognize a duty of care.  The Supreme Court of Canada in Martel set out the policy reasons underlying the common law's traditional reluctance to permit recovery for pure economic loss:

 

            “First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests.  Secondly, unbridled recognition of economic loss raises the spectre of indeterminate liability.  Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party in whom they fall through such means as insurance.  Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate law suits.  

 

However, Canadian jurisprudence shows that there was no automatic bar to recovery for pure economic loss.

 

Justice Gillese utilized the test established in Anns v Merton Borough Council  to determine whether a novel duty of care between a mutual insurance company and its participating policyholders should be recognized in the present case.  Anns is a 2 stage test for determining whether a duty of care arises - i.e., 1) was the harm that occurred, the reasonably foreseeable consequence of the Defendant’s Act; and 2) are there reasons, notwithstanding the proximity between the parties that tort liability should not be recognized?

 

Applying the Anns test, the Court of Appeal agreed with Justice Newbould that the harm the class members suffered was a reasonably foreseeable consequence of Manulife’s transfer of their policies.  However, the appeal judges disagreed that a prima facie duty of care had been established.  They concluded that given the tenuous and inchoate nature of the interest that the policyholders sought to have protected, the proximity requirement had not been satisfied and a prima facie duty of care did not arise.

 

Having found no prima facie duty of care at the first stage of the Anns test, the Court held that it was unnecessary to continue the second stage and consider whether there were residual policy considerations that would negate the imposition of a new duty of care.  Despite that finding, Justice Gillese held that there were two policy considerations that precluded a duty of care -  the spectre of indeterminate liability and a multiplicity of inappropriate law suits. 


The court dismissed the policyholders' appeal.


Regards,


Blair 

 

Guatemalan Plaintiffs sue HudBay and Subsidiaries in "Novel" Negligence Actions

Justice C.J. Brown of the Ontario Superior Court of Justice dismissed a motion brought by HudBay Minerals Inc. ("HudBay") and two of its subsidiary corporations, including one Guatemalan corporation) to dismiss novel actions for negligence.  In the this case, the plaintiffs sued HudBay for its failure to prevent the harm allegedly caused by its security personnel at mining projects owned by HudBay's subsidiary corporations in Guatemala. (Choc v. Hudbay Minerals Inc. 2013 ONSC 1414)

 

The plaintiffs are indigenous Mayan Q'Eqchi' from the El Estor region of Guatemala.  They started three separate actions: Margarita Caal Caal v. HudBay;  Angelica Choc v. HudBay; and German Chub Choc v. HudBay.

In the Caal action, the plaintiffs were 11 women, who alleged that they were gang raped by mining company security personnel, police and military during their forced removal from their village as requested by a HudBay subsidiary.     

 

In the Choc action, the plaintiff alleged that her husband, a respected indigenous leader and outspoken critic of mining practices, was beaten and shot in the head by security personnel of a HudBay subsidiary in the context of a land dispute.

 

In the Chub action, the plaintiff alleged that a gunshot wound left him paralyzed from the chest down and that he was shot in an unprovoked attack by security personnel employed at HudBay's subsidiary's mining project in the context of a land dispute.  

 

The actions arose out of a dispute as to ownership of land in Guatemala.  At all material times, the HudBay defendants maintained that they had a valid legal right to the land while the Mayan communities claimed that the Mayan Q'Eqchi' were the rightful owners of the lands which they considered to by their ancestral homeland.  The plaintiffs alleged that the defendants' claim to ownership was illegitimate because the rights of the defendants were derived from a dictatorial, military government which granted those rights during the Guatemalan civil war at a time when the Mayan Q'Eqchi' were being massacred and driven off their lands. 

 

In 2011, the Constitutional Court of Guatemala, the highest court in the country, ruled that the Mayan Q'Eqchi' communities had valid legal rights to the contested land and ordered the Guatemalan government to formally recognize those rights.  When the Mayan Q'Eqchi' had originally attempted to reclaim their ancestral homelands, there were allegedly numerous forced evictions, burning of hundreds of homes, murders and alleged human rights atrocities, including those giving rise to the three actions. 

 

The defendants brought three motions:  (i)  a motion to strike the statements of claim on the basis that they disclosed no reasonable cause of action against HudBay; (ii)  a motion to dismiss the Caal action as being statute-barred pursuant to the provisions of the Limitations Act, 2002; and, (iii)  a motion disputing the court's jurisdiction over the Guatemalan subsidiary.  

 

The court ordered that the three actions be consolidated and the motions were heard together before Justice Brown.  She dismissed all three motions.   

 

The Rule 21 Motion To Strike

 

On this motion the defendants argued that there was no recognized duty of care owed by a parent company to ensure that the commercial activities carried on by its subsidiaries were conducted in a manner designed to protect people in foreign countries.  In addition, they pleaded that HudBay was not responsible at law for the actions of its subsidiaries. 

 

Amnesty International Canada intervened in the motions to support the position of the plaintiffs. 

 

With respect to the vicarious liability claim, Justice Brown held that the plaintiffs pleaded in the Choc action that the Guatemalan subsidiary was an agent of HudBay.  In doing so, the plaintiffs had pleaded an exception to the rule of separate legal personality, i.e. where the corporation has acted as the authorized agent of its controllers, corporate or human, the allegation is not patently ridiculous or incapable of proof and must be taken to be true for the purposes of the pleadings motion.  Accordingly, the claim against HudBay on the basis of actions by its foreign subsidiary was allowed to proceed.  

 

In respect of the claim for direct negligence against HudBay, the judge held that the plaintiffs had pleaded all material facts required to establish the constitute elements of their claim.  However, the duty of care that the plaintiffs pleaded was not an "established" duty of care.  Accordingly, it was necessary for Justice Brown to apply the test for establishing a novel duty of care (the Anns test), i.e. that the harm complained of was reasonably foreseeable; that there was sufficient proximity between the parties that it would not be unjust or unfair to impose a duty of care; and, that there was no policy reasons to negate or otherwise restrict that duty.  Justice Brown held that the plaintiffs had met all three parts of the test.  With respect to policy considerations, she held that they were competing policy considerations and that it was not plain and obvious that they should be fatal to the case at the pleadings stage. 

 

The Limitations Act Motion

 

The defendants sought to have the Caal action dismissed on the basis that it was statute-barred because it was commenced after the basic limitation period of two years after the day on which the claim was discovered. 

 

However, section 10 of the Limitations Act provides an exception to the two year limitation period for claims based on an assault or sexual assault.  The provision reads as follows:

 

10 (1)    The limitation period established by section 4 does not run in respect of a claim based on assault or sexual assault during any time in which the person with the claim is incapable of commencing the proceeding because of his or her physical, mental or psychological condition.  

 

10 (3)   Unless the contrary is proven, a person with a claim based on a sexual assault shall be presumed to have been incapable of commencing the proceeding earlier than it was commenced.  

 

The plaintiffs argued, and Justice Brown accepted, that the language used in the Limitations Act of "claims based on sexual assault" is not intended to be limited to claims against the actual perpetrator, but is broad enough to include claims of vicarious liability and negligence against all persons whose acts or omissions contributed to the damage suffered as a result of the misconduct.  The Limitations Act specifically defines "claim" to mean "a claim to remedy an injury, loss or damage that occurred as a result of an act or omission".  Therefore, a "claim based on sexual assault" must include a claim to remedy injuries from a sexual assault caused by negligent acts or omissions.  In addition, the plaintiffs relied on the principle of interpretation that legislative provisions were to be given a large and liberal interpretation and are to be interpreted in line with their objectives.  They submitted that the purpose of section 10 of the Act was to make it easier for victims of sexual assault to bring their claims.  

 

Justice Brown accepted the submission and dismissed the Limitations Act motion.

 

As a result, there was no need to hear the jurisdiction motion because HudBay's foreign subsidiary conceded that if the first two motions were dismissed it would be a necessary and proper party to the Choc action.  

 

Regards,

 

Blair